Exercise 22-7 Departmental contribution report LO P3 Below are departmental income statements for a guitar manufacturer. The manufacturer is considering eliminating its electric guitar department since it has a net loss. The company classifies advertising, rent, and utilities expenses as indirect. WHOLESALE GUITARS Departmental Income Statements For Year Ended December 31, 2017 Acoustic Electric Sales $183, ese $83,800 Cost of goods sold 45,175 47.259 Gross profit 57,825 36,550 Operating expenses Advertising expense 5,065 4.268 Depreciation expense-equipment 10,99 8,560 Salaries expense 20,80 17,900 Supplies expense 2,080 1,779 Rent expense 7,015 5,960 Utilities expense 2,995 2,590 Total operating expenses 47,165 41,040 Net income (loss) $ 10,660 $(4,490) 1. Prepare a departmental contribution report that shows each department's contribution to overhead. WHOLESALE GUITARS Income Statement showing Departmental Contribution to Overhead For Year Ended December 31, 2017 Acoustic Dept. Electric Dept Combined Direct expenses Total direct expenses Departmental contributions to Overhead Indirect expenses Total indirect expenses 2 Based on contribution to overhead, should the electric guitar department be eliminated? O No Yes